Fund manager of Greencoat UK Wind to depart

Longstanding Greencoat UK Wind (LSE:UKW) manager Stephen Lilley will step down from the investment trust in two months’ time.

Lilley has been manager of the renewable infrastructure trust since it launched in 2013, alongside Laurence Fumagalli, who stepped down around a year ago.

Both Lilley and Fumagalli were among the co-founders of Schroders Greencoat, the investment management team for Greencoat UK Wind. Lilley will also step down as co-head of Schroders Greencoat.

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Fumagalli was replaced on the investment trust by Matt Ridley last March. Ridley will now be joined by Steve Packwood, who joined Schroders Greencoat last month.

The manager change was announced on the same day as the annual results (27 February), in which the trust reported a net asset value (NAV) decline of -7.9%. Declines in power prices proved to be a headwind. With dividends reinvested, the NAV loss is smaller at -1.3%, however, its share price total return loss is steeper, at -10.2%, according to FE fundinfo. This is reflective of its discount widening over the period, from -7.7% to -15.5%. Greencoat UK Wind’s discount has since widened further and is currently -25.9%.

Over the past couple of years, the renewable energy infrastructure sector has been out of favour with investors due to the higher level of income investors can obtain through lower-risk assets, with cash and government bonds with short lifespans offering yields of around 4.5%. Such a backdrop reduces the appeal of trying to obtain higher yields for a higher amount of risk.

This has caused discounts to widen considerably for investment trusts specialising in areas of renewable infrastructure.

Greencoat UK Wind, which as the name suggests invests in UK wind farms, aims to provide investors with a yearly dividend that increases in line with RPI inflation. It has successfully achieved this each year since the trust launched in 2013. Greencoat UK Wind is popular with interactive investor customers, regularly featuring in our monthly top 10 most-bought investment trusts’ table. It was second place in the rankings in January. 

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While Greencoat UK Wind’s income track record is strong, and its current yield of 9.3% eye-catching, investors are nursing losses over one and three years. Over those periods, its share price total returns are losses of -11.7% and -6.3%. Over five years, it is up 4.4%, while over 10 years, its share price total return is more favourable, at 88.2%.

The board has committed to further share buybacks of £100 million over the next year in an attempt to reduce the discount. This would take the total amount of share buybacks the trust has agreed to £200 million.

Commenting on Lilley stepping down, Lucinda Riches, chair of Greencoat UK Wind, said: “On behalf of the board, I want to take this opportunity to thank Stephen for his vision, judgement and unwavering commitment to list, manage and grow Greencoat UK Wind over the last 12 years.

“Alongside Laurence Fumagalli and, more recently, Matt Ridley, he created the first renewable infrastructure fund and has grown it into one of the UK’s largest wind farm owners while delivering strong returns for shareholders, including £1.2 billion of dividends and over £900 million reinvested in the portfolio. Stephen leaves the company well placed to capitalise on its leading position.

“We are delighted to appoint Steve Packwood, bringing a wealth of experience and expertise in the renewable energy industry, which will be invaluable for Greencoat UK Wind. As a board we look forward to working with Steve and Matt to continue driving the business forward and delivering for our stakeholders.”

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Commenting on the trust’s annual results, Riches said the board recognises that it has been a challenging year for investors.

She added: “Notwithstanding the current market conditions, our simple, low-risk and proven model remains highly attractive. We have a sizeable and diverse portfolio of high-quality assets and are well positioned to help deliver the UK government’s net-zero ambitions.

“We are continuing to deliver net returns to investors of 10% on NAV, and we remain confident in our ability to continue to meet our objectives of dividend growth in line with RPI and capital preservation over the longer term.”